Pulling it Together: Last Week’s Health Reform “Shocker”

Jun 24, 2009

Last week we learned that health reform could cost the federal government at least a trillion dollars over ten years, and that it will be really difficult to forge bipartisan agreement on legislation and keep major interest groups on board. This obviously brought more angst to the deliberations, several Republicans seized the moment to criticize the Democrats’ plans, and the press was all over it, with many commentators declaring health reform in dire straits. But experts have long known that this is roughly what the government price tag for universal coverage with comprehensive benefits would be, and everyone knows that bipartisan support will be very hard to achieve.

Health reform debates have phases. Now that the details of the legislation are beginning to emerge, we are entering the next phase and the real debate is beginning. Last week’s reaction in Washington began as an overreaction to a Congressional Budget Office (CBO) analysis of part of a plan from one of five committees in the Congress playing important roles in health reform, driven by what is now a virtually instantaneous news cycle. The real shocker would have been if health legislation moved smoothly through the Congress to the President’s desk. It’s not an accident that we have failed so many times before at health reform and that, on average, it has been 19.7 years between major health reform debates since Truman.

Despite last week’s problems, the planets are still aligned as almost never before, with strong presidential support, unprecedented leadership and cooperation among two usually turf conscious committees in the Senate and three in the House, and public desire for action that will address people’s worries about paying their health care bills and their fears about losing health insurance coverage. There is also conceptual agreement on many core elements of the legislation, from expanding coverage to reforming the health insurance marketplace – the two areas of the legislation that will mean the most to people struggling to pay for health care – to beginning longer range reforms of health care delivery and payment. There was even a hint that bipartisanship might be possible in last week’s health reform proposal from three former Republican and Democratic Senate Majority Leaders. Its price tag was $1.2 trillion.

The fight over the idea of a public plan, and the many variations on that theme, has obscured these underlying areas of agreement. But ultimately it’s the sticker shock of the government cost that seems to have caused the most anxiety. Should it?

For one thing Congress can reduce the cost, and they are working on that. The tradeoff may be fewer people helped and smaller subsidies.

But the number itself could use some perspective. Expressed as a ten-year cost, one trillion dollars is a big, perhaps scary number. But we are also talking about reforming one sixth of our economy, and over the next ten years it would represent about half of one percent of projected GDP, under three percent of projected health spending, and about two and one-half percent of total federal spending. That is still a lot, and some may legitimately value other national priorities more highly, including deficit reduction, but in return we would reform health care, cover the bulk of the uninsured (projected by CBO to reach 54 million by 2019 and by others to go higher), and give Americans peace of mind about their health insurance.

One important reason policymakers want to get the ten-year price tag down is so that it is within hailing distance of a package of revenue raisers and savings measures they can more easily sell to major interest groups and to the public. All the talk about bending the curve and inefficiencies in the health care system has helped to make the case for long run cost containment, but it may have hurt in the short run. Our polls show that most Americans (60%) think that if policymakers made the right moves they could cover the cost of health care reform without spending new money, which is not true. More needs to be done to explain to the public why health reform requires a substantial up front outlay from the federal government, that policymakers plan to pay for it and not add to the deficit, and most especially, that almost all of the money goes directly to help people struggling with their health care bills.

What happened last week is that the health reform debate entered its next phase. The numbers are big because health care is big. The “shocker” would have been if it had been otherwise. Now the heavy lifting and the real compromising begin.